Mothercare, which has 353 UK shops, has been squeezed by supermarkets and online retailers. Photograph: Rex Features

The high street spending slump has claimed the scalp of Mothercare's chief executive, Ben Gordon, a week after the babies' and children's goods retailer issued a profits warning that sent shares diving.

Gordon, who has been at Mothercare for nine years, successfully expanded the business overseas but the UK operation has taken a battering and scores of town-centre stores have been shut. A statement from the Mothercare board, headed by Alan Parker, said Gordon was leaving "by mutual consent" next month, when he will walk away with a £600,000 payoff – equivalent to a year's salary.

Mothercare, which has 353 UK stores, has struggled as the major supermarkets target the mother-and-baby market. Although the 50-year-old company has a large business overseas, the UK chain delivers the lion's share of profits. But Gordon said last week its profit margins had been hit by a wave of discounting and that hard-up shoppers were also "trading down" on big-ticket purchases such as pushchairs. It was the company's third profit warning in a year.

His departure comes amid a slump in high street spending that has seen many specialist retailers such as Mothercare, HMV and Game squeezed between price-cutting supermarkets and cheaper online outlets.

Gordon said last week that the company had seen a downturn in consumer confidence since the riots and trading had deteriorated further in the last four weeks. He said: "The real issue is the underlying economic malaise. UK customers aren't spending as much as they were." The company said cash-strapped parents were buying cheaper prams, buggies and car seats and clothing sales had begun to tail off.

However, even food retailers have been hit as consumers suffering from reduced incomes have cut back on basics as well as bigger ticket items.

"I don't think I've ever seen consumers squeezed so much," Peter Marks, chief executive of the Co-operative Group, told the annual conference of the grocery industry group IGD in London on Tuesday. "For the first time that I've witnessed we're actually seeing … the consumer spending less on food because they can't afford to spend what they normally do."

However, Gordon said he believed Mothercare could recover. "Over the last nine years as chief executive, I have overseen great changes in the group," he said. "Mothercare … has huge potential."

Parker, a tough operator who led the turnaround of the leisure group and former brewer Whitbread, replaced Ian Peacock the company as chairman in the summer. Following Gordon's exit, the management will report directly to Parker. The board is already looking for a chief executive.

Mothercare, which specialises in products for expectant mothers and in general merchandise for children up to eight years old, was founded by the entrepreneur Selim Zilkha in 1961 and listed on the stock exchange in 1972 before becoming a fixture on British high streets. It extended its footprint in 2007 when it bought the Early Learning Centre for £85m.

News of Gordon's resignation resulted in the shares rising 14% at one point as investors speculated that Mothercare could embark on a radical revamp to boost profits.

Analysts said Gordon had paid the price for last week's profit warning, which revealed UK like-for-like sales had slumped 9.6% in the 12 weeks to 1 October.

Mothercare has been restructuring the British business and estimates it will have closed 100 outlets by the end of the year, at the higher end of its forecast.

Seymour Pierce analysts suggested the company could close down its UK business at a cost of £100m, leaving its international business – run as a franchise – worth £280m to £300m, compared with Mothercare's current market value of £185m.

Leading internal candidates to replace Gordon include Michael Logue, head of the British operation, and Jerry Cull, who leads the international arm.

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